Comments from the CEO

The first quarter always entails lower activity as a result of the season and weather. Since our acquisition of operations in mineral aggregates and paving, this pattern has become even more distinct. At the same time Peab’s overall business has become more diversified in terms of countries, products and customers. The first quarter presented improved margins in construction contract operations and housing developments, a good level of orders received and a strong financial position. 

Group development

Net sales for the first quarter of the year were SEK 11,216 million (11,638). Operating profit was SEK -73 million (211), of which around SEK -300 million refers to seasonal variations related to the acquisition of paving and mineral aggregates operations. The operating margin was SEK -0.7 percent (1.8). Cash flow before financing was SEK -108 million (1,597) and was affected by the seasonal variations in business area Industry.

Business area development

As of this quarter we report net sales and order backlog allocated into more product areas than previously in the business areas Construction and Civil Engineering. In Construction housing represents a considerable share of both net sales and order backlog while there is a lot of product variation in the business area. Net sales contracted by six percent in business area Construction, primarily related to Swedish operations, but the operating margin improved to 2.4 percent (2.2). Operation and maintenance and Roads and other infrastructure are growing in business area Civil Engineering. Net sales increased in business area Civil Engineering by twelve percent and the operating margin improved to 1.7 percent (1.5). All in all the operating margin for construction contract operations amounted to 2.2 percent (2.0).

Net sales in business area Industry were on par with the corresponding period last year, but adjusted for the acquired units net sales decreased by 12 percent. The acquired operations have a distinct seasonal pattern which means there are substantial deficits in the first quarter since the paving season does not begin until the second quarter. The operating margin for the first quarter 2021 was -18.0 percent (-3.0). The cold winter has also had a negative effect on profit in business area operations.

Net sales in Project Development contracted by 13 percent, primarily due to lower net sales in Housing Development. The operating margin increased in Housing Development to 12.1 percent while operating profit decreased in Property Development. As previously stated, the relatively limited impact of the corona pandemic has primarily affected Property Development in operations connected to travel and tourism.

Start-ups of our own housing developments during the first quarter were 662 (503), of which more than 200 were converted from rental apartments. The production starts are well spread geographically and home sales have been good in all three countries during the period.

Order situation

The level of orders received continues to be high. It amounted to SEK 14,446 million during the first quarter of the year, which is 15 percent higher than the same period last year. The increase largely refers to business area Industry and the acquired paving and mineral aggregates operations but the number of orders received has grown in business areas Civil Engineering and Property Development as well. The greater number of production-started homes contributed to the level of orders received in Property Development. Order backlog increased by seven percent to SEK 47,286 million, of which 38 percent will be produced after 2021.

We have previously established that orders are well spread in both place and product, but I also want to emphasize that it is just as important to maintain a good balance between commissions from our public and private customers. Recently we have noticed an upswing in orders from the public sector.

Market and outlook for the future

The outlook for our markets remains stable and in general has not changed compared to previous forecasts. Housing construction is expected to develop more or less horizontally in Sweden, Norway and Finland during the period 2021-2022. Other housing construction is expected to grow in Sweden, decline in Norway and be constant in Finland in 2021. Public investments continue to contribute to market developments in all the countries. This is true for civil engineering as well where investments in 2021 are expected to grow in Sweden and Norway but contract in Finland.

” The first quarter presented improved margins in construction contract operations and housing developments, a good level of orders received and a strong financial position.”

Financial and non-financial targets

As of 2021 we have a new mission and business concept and updated strategic targets with concrete financial and non-​financial targets that we will monitor quarterly, semiannually or annually. All this owing to the fact that now we are fully a Nordic community builder with extensive local presence and four collaborating business areas.

Although the pandemic and its consequences continue to permeate our daily lives, our well functioning project organization is handling disruptions as they come along. This is why we haven’t experienced any significant effects so far of, for instance, material shortages. Instead I see a fantastic engagement in our employees in these exceptional times. Long-​term external forces also point in our favor. With our decisive and strong business model I have therefore every confidence in Peab’s ability to create value in the future from a helicopter perspective. We have everything we need to achieve our strategic targets to have within our industry the most satisfied customers, be the best workplace and the most profitable company – and now also lead in social responsibility.

 

Jesper Göransson
President and CEO